AuthorTopic: Should I file Bankruptcy... (Read 22237 times)

Generally, student loans are not discharged in a Chapter 7 bankruptcy case. Presently, the only ground for discharge under the bankruptcy code is that the repayment of the loan "will impose an undue hardship on the debtor and the debtor's dependents." Unfortunately, it is extremely difficult and rare to meet the criteria for an "undue harship".

This standard is generally interpreted to mean that the debtor cannot maintain a minimally adequate standard of living and repay the loan. It usually requires a showing that the conditions that make repayment a hardship are unlikely to improve substantially over time. Many courts use the test for undue hardship found in the Brunner case.

There is very little appellate authority on the definition of "undue hardship" in the context of 11 U.S.C. § 523(a)((B). Based on legislative history and the decisions of other district and bankruptcy courts, the district court adopted a standard for "undue hardship" requiring a three-part showing: (1) that the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans. The first part of this test has been applied frequently as the minimum necessary to establish "undue hardship." The further showing required by part two of the test is also reasonable in light of the clear congressional intent exhibited in section 523(a)( to make the discharge of student loans more difficult than that of other nonexcepted debt. Predicting future income is, as the district court noted, problematic. Requiring evidence not only of current inability to pay but also of additional, exceptional circumstances, strongly suggestive of continuing inability to repay over an extended period of time, more reliably guarantees that the hardship presented is "undue."

Under the test proposed by the district court, Brunner has not established her eligibility for a discharge of her student loans based on "undue hardship." The record demonstrated no "additional circumstances" indicating a likelihood that her current inability to find any work would extend for a significant portion of the loan repayment period. She was not disabled, nor elderly, and she has -- so far as the record disclosed -- no dependents. No evidence was presented indicating a total foreclosure of job prospects in her area of training. In fact, at the time of the hearing, only 10 months had elapsed since Brunner's graduation from her Master's program. Finally, as noted by the district court, Brunner filed for the discharge within 1 month of the date the first payment of her loans came due. Moreover, she did so without first requesting a deferment of payment, a less drastic remedy available to those unable to pay because of prolonged unemployment. Such conduct did not evidence a good faith attempt to repay her student loans.

Student loans are contracts like any other loan and are subject to challenge for fraud, etc. Also, students loans are not enforceable when the school has closed prior to the student completing his education. These challenges could be raised in a Chapter 13 proceeding and decided by a bankruptcy judge. In the usual Chapter 7, there is no dividend to creditors and thus no reason for the bankruptcy court to rule on the enforceability of a claim, outside of an adversary proceeding to obtain a hardship discharge.

Challenging the loan balance

A pervasive problem in student loans is the state of the lender's records: the loan has been transferred several times and it is not clear just what is owed and whether all the additional charges are in accordance with law. Consider using an objection to the claim of the holder of a student loan in a Chapter 13 to get a judicial determination of the rights of the borrower: in bankruptcy, the burden of proof is on the creditor. Once a judge decides what is properly owed, principles of collateral estoppel should make the decision of the bankruptcy court binding on the lender even if the repayment period on the loan stretches beyond the end of the plan.

"There's a major concern," Sebert said. "If you graduate with average private law school debt and earn something other than the average salary, you are going to have trouble." The prognosis also is bleak for new attorneys in smaller firms, who typically earn much less than those at large firms. The median salary for first-year associates in firms with 26 to 50 attorneys was $65,000 in 2004, just 44% more than the median salary at those firms in 1990, which was $45,000. Beginning lawyers at law firms with two to 10 lawyers earned $48,000 in 2004, compared with $30,000 in 1990.

Not to mention that to pay that debt, you'd have to actually get a job, although that'd would be a lousy one paying $45-50K a year ... But I understand, being called a "lawyer" is important for some people, although for the next 10-15 years after they finish school they'll have less money on their hands than, say, the paralegal they work with ..

Perhaps more of a concern about default rates is that fewer law graduates are passing the bar, which delays or even precludes their ability to repay their loans. Nova Southeastern's Harbaugh is troubled by the impact on debt load because of the 64% pass rate for first-time test takers in 2004. The pass rate in 1995 was 78%. "It's the lurking issue," he said.

And BTW, where does that 64% bar pass rate of Nova comes from? It's just 58% ..

"There's a major concern," Sebert said. "If you graduate with average private law school debt and earn something other than the average salary, you are going to have trouble." The prognosis also is bleak for new attorneys in smaller firms, who typically earn much less than those at large firms. The median salary for first-year associates in firms with 26 to 50 attorneys was $65,000 in 2004, just 44% more than the median salary at those firms in 1990, which was $45,000. Beginning lawyers at law firms with two to 10 lawyers earned $48,000 in 2004, compared with $30,000 in 1990.

Not to mention that to pay that debt, you'd have to actually get a job, although that'd would be a lousy one paying $45-50K a year ... But I understand, being called a "lawyer" is important for some people, although for the next 10-15 years after they finish school they'll have less money on their hands than, say, the paralegal they work with ..

First off, your salary ain't gonna stay $50K during those 10-15 years you count .. it'll probably go up, unless you absolutely don't like practing law and decide to quit .. second, 10-15 years will be needed to pay an immense amount of debt, in the range of $200K -- is this how much you have taken out in loans? If that's the case, you should try to refrain yourself from spending more than you have to while in law school ..

"There's a major concern," Sebert said. "If you graduate with average private law school debt and earn something other than the average salary, you are going to have trouble." The prognosis also is bleak for new attorneys in smaller firms, who typically earn much less than those at large firms. The median salary for first-year associates in firms with 26 to 50 attorneys was $65,000 in 2004, just 44% more than the median salary at those firms in 1990, which was $45,000. Beginning lawyers at law firms with two to 10 lawyers earned $48,000 in 2004, compared with $30,000 in 1990.

Not to mention that to pay that debt, you'd have to actually get a job, although that'd would be a lousy one paying $45-50K a year ... But I understand, being called a "lawyer" is important for some people, although for the next 10-15 years after they finish school they'll have less money on their hands than, say, the paralegal they work with ..

First off, your salary ain't gonna stay $50K during those 10-15 years you count .. it'll probably go up, unless you absolutely don't like practing law and decide to quit .. second, 10-15 years will be needed to pay an immense amount of debt, in the range of $200K -- is this how much you have taken out in loans? If that's the case, you should try to refrain yourself from spending more than you have to while in law school ..

xen, you've spoken like my mom! How old are you BTW?!

And as for $200K in debt -- while I agree it's a h e l l of a lot of money, some students do have that much debt (interest added also) after being in school for 7 straight years ...

The legal profession worships credentials. People assume people from big, fancy law firms are smarter, and they assume people from fancy expensive law schools are better. You're a big liar if you pretend it's not true. Maybe it goes away or subsides after a career of practicing law, but young lawyers (and certainly those applying to and attending law school) feel it acutely, and I bet the middle-aged lawyers who might have forgotten this need only check their ingrained assumptions to see that it's still there.

I'm impressed by people with a recognizable law firm name on their resume, or a fancy diploma on their wall. Even though I have neither. Talk about low self-esteem. That's ugly. And when I talk to my friends from undergrad who are miserable at the most prestigious of white-shoe firms, I wonder whether I would've could've should've taken that route. People, this is crap! Let's think about this. Is this really a good way to discern among people in our profession? I thought the Harvard summer associates in were the worst of the bunch -- not good writers, not especially impressive thinkers, and with an air of entitlement that was really ugly.

I could rant a lot longer (don't get me started on law review, for example, which I'm reading a lot of law students blog about) but the gist of it is, the legal profession exerts a nearly irresistible pressure on talented young people to climb to the highest rung of a specific and extremely narrow ladder. To do so, they incur big big debt, and take on impossibly demanding schedules, at school and in the beginnings of their professional career. And then the golden handcuffs kick in (and the professional snobbery sinks deeper) and making a different choice means admitting you can't "hack it". It's a real trap for the unwary.

and making a different choice means admitting you can't "hack it". It's a real trap for the unwary.

This is true only in 2 situations:

1. You buy into all this crap, and make yourself feel this way; and/or2. You are friends with or hang out with lots of people who feel this way.

You either need to change the way you think and feel about the legal profession (since your current feelings make you feel cynical and depressed), or you need new friends.

Everyone assumes the the entire profession is make up of these white shoe firms, and everything else isn't worthy. If you actually take a look around you, however, the VAST MAJORITY of attorneys are in small firms. A good number are in government or public interest work. And I'd say that most of these attorneys aren't going to think, "you can't hack it" because you dont' take a $150k a year job so you can be chained to your desk.

Its a choice you make for yourself. The people who whine about the horror of working in a big firm really annoy me, because its a grave you dug yourself. If you could get hired by a huge, prestigious white-shoe firm, you absolutely could have been hired by a smaller firm with a better lifestyle and atmosphere. (and this is why I stopped reading the Opinionista's blog long before it jumped the shark - she did nothing but b*tch about something she did to herself.)

no. You should get some solid advice about budgeting so that you can pay your debts and also save some money and plan for the future.

Now is a good time to go to an HR Block office to have your tax return filed. Request a financial advisor, which is a free service for clients. The office will arrange for the financial advisor to call you.

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"I enjoy being in school. I've learned so much already, with taking economics and law, and I have marketing and statistics coming up next."

Let me introduce myself. I, the pompous, am a part of all human personalities. I exist more in some people than in others. I am the part of your personality that takes control of you when you just have to be on top. I make you want to be on top, and it doesn't matter if you beat the best competitio

no. You should get some solid advice about budgeting so that you can pay your debts and also save some money and plan for the future.

Now is a good time to go to an HR Block office to have your tax return filed. Request a financial advisor, which is a free service for clients. The office will arrange for the financial advisor to call you.

How hot are the accountants usually? Feel free to use 1-10 or LSAT scoring scale.